Gerhard Barcus, of Certius, from UAE and Iran, said, live from Tehran, foreign– not US– companies are seizing opportunity in Iran, at the International Business Initiative. There is pent-up demand for western consumer goods and technology. Ventures don’t require an Iranian partner. 70% of industry is government-owned. Travel is permitted except for military areas. A visa is required for US citizens. Women have broader rights than in Saudi Arabia. Iran signed international arbitration treaties and does much business with the “Stans.” Lifting of sanctions increased investment. Iran no longer threatens Israel. Many Iranians admire the US. The country is safer. Political and religious discussions must be limited to trusted friends.
Certius helps companies work in Iran. Its European and Iranian management and consulting professionals in many industries and network in local business and administration perform strategy and planning, risk assessment, sales & distribution set up, local partner match making, marketing strategy, locating and working with local law and financial services firms and HR service providers, brand building, sales, mergers and acquisitions. Companies should not seek quick profit. Iran is complex! Start with import, and sales by a national distributor. Define expansion milestones. Phase in production and a fully owned and managed sales and distribution system. Tailor products and services to consumers. Invest in data, consumer understanding and intelligence, not just market visits and talking to people. Localize marketing, tailored to cultural and legal requirements. Invest time and money to understand the retail landscape. Reaching enough shops and activating a brand appropriately are major challenges. Obtain a local partner who knows how to do things, with research and background searches. Avoid working with a company which in effect (though not legally) is controlled by an entity on an SDN list. In ventures retain a majority interest. Avoid infringing sanctions. Secure language and culture capability. Understand how Iranians do business. They are different than Arabs. Understand the complex, bewildering regulatory framework and rules for your business.“Grey” imports are a big nuisance. Red Bull withdrew because it could not compete on costs with Turkish grey imports. Import duties for legal import are often high. Secure appropriate local talent, which, in the western sense, is scarce. Build relations with public authorities. Issues will arise. Invest within the Iran’s Foreign Investment Promotion and Protection Act framework. It protects investors.
German exports rose 15% to 1.13 billion euros through June 30, 2016. A strategy to attract $100 billion investment in oil prompted new model contracts. Youth literacy is 98%. University enrollment is 58%. The economy is diversified. Opportunities exist in the transportation, aviation, oil and consumer products industries. Proctor and Gamble through foreign subsidiaries established a solid foothold in Iran, even though Pantene and Head and Shoulders cost 4 times as much as local products. South Pars is the largest natural gas field in the world and India, Pakistan and Turkey need natural gas. Tourism will likely to triple by 2015 from 5 million visitors a year in 2014, with Persepolis, Shiraz and Isfahan and many UNESCO world heritage cultural sites. Iran has significant deposits of zinc, copper, iron ore, silver and manganese. 20% of world oil trade passes through the Strait of Hormuz. Iran connects India, Central Asia, and Russia. Links to China’s new Silk Road by rail could boost trade between those countries by $600 billion.
Iran’s courts are slow and rulings unpredictable. Alcohol is harder to find than in non-muslim countries. Iran Transactions and Sanctions Regulations, 31 CFR §560.206(a)(2), still ban most transactions by US companies, with exemptions for agriculture, food, health, and civil aviation. What about working through a foreign subsidiary? It is unclear whether money earned with a transaction with Iran, deposited into a non-U.S. bank account from which a company in an unrelated transaction pays for U.S. consulting services in US dollars violates the sanctions rules. While the rule should be that once received from Iran funds belong to a company and may be spent on US transactions, now the law is unclear.
Inflation deceased from 40% in 2013 to 10.5%. Banks decline business even without direct involvement with the US banking system. Most U.S. companies can’t operate there. Eliminating restrictions brought $50 billion from Europe: $25 billion to Airbus and $5 billion to Italy’s state rail company. Avoiding the U.S. financial system for transactions is difficult. Rule of law must reduce money laundering. Suspicion of Western influence stalls competition which will reduce prices and bring shared international best practices, technology transfer and public-private partnerships.
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J. Michael Considine, Jr., Chairman, The International Business Initiative.